Law:

Section:

Section 56 of the Income-tax Act, 1961 - Income from other sources - Chargeable as - Assessee-company leased out printing machinery and a distillery plant on rent - Assessee never carried on at any time either business of printing or that of a distillery - Whether income received by assessee by way of rent from leasing of printing machinery, etc., should be assessed under head 'Income from other sources' - Held, on facts, yes Facts The assessee-company owned a printing machinery and a distillery plant. It had let out the printing machinery to company A for a term of five years and the distillery plant to company N. The ITO treated the income derived from the letting out of the printing machinery and the distillery as income from other sources. The Tribunal noted (i) that the assessee after purchasing the printing machinery directly installed it in the premises of the lessee, (ii) that the assessee never carried on any printing business of its own and never utilised the machinery for any printing work of its own, (iii) that so far as the distillery was concerned, the assessee never applied for licence to run the distillery, but leased out on rent the distillery plant with the land and building to the company N, which was renewed further and further, and (iv) that the assessee had always treated the assets in question as fixed asset and not in the nature of its circulating capital leading to profit of business. The Tribunal, therefore, held that the assessee was not carrying on any business of letting out printing machinery or distillery plant and, therefore, the income by way of rent received by it should be assessed under the head 'Income from other sources' and not as business income. On reference: Held In CEPT v. Shri Lakshmi Silk Mills Ltd. (1951) 20 ITR 451 , the Supreme Court held that if the object of letting out the asset is to earn a profit in the ordinary course of its business, it results in business income. On the other hand, if the object of letting out the asset is merely to earn rent as owner of the asset, such income would be from 'other sources', if there is no other indication to show that such asset is treated as its commercial asset and a…

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